Commentary and Tracking of a Portfolio of Stocks using approach from "The Little Book that Beats the Market" by Joel Greenblatt aka Magic Formula Investing

Saturday, January 06, 2018

MFI Diary Weekend Update 1/6/18

Weekend Update 1/6/18

Quite a cold spell here in New England. Today is 12th straight day it hasn't reached above freezing, day or night. -1 right now and heading to -10 tonight. Toss in our 14" of snow from Thursday and we're really having fun.

But I have a hot cup of coffee plus a steaming bowl of Quaker Oatmeal in a warm house. So its really not that bad. You have found your way to the MFI Diary. This is a blog following the investment approach described by Joel Greenblatt in The Little Book That Beats The Market. I have been writing this blog and following his investment approach since early 2006.

I did create a guide recently for new readers to my blog that point you to some key/interesting posts. I encourage you to give it a whirl Guide To New Readers). (PS - let me know, in the grievance section, if this link does not work). Of course, I have to have a disclaimer - I am just a guy with a spreadsheet and not a stock advisor. You should do your own due diligence before acting on anything you read here.

Any opinions you read are my own unless they end up being really bad.

Onwards.

Last Week Today

Well, we made it to 2018. Calendar was flipped, but markets kept moving up every day with limited volatility as per the plan. Maybe 90% of trading is done by computers now and they just don't get emotional... nah! It was a great week for me overall, up over 2%. But astonishingly, that still lagged the Russell 3000 which scored an eye-popping 2.3% gain in week 1, 2018. Recall though that this year I also have a dividend index, which will be the measure of my dividend portfolio. It was up 0.5%. So really, on a blended basis I beat the indices overall.

Here is where I stand after the first week:

Component

YTD

Overall

+2.1%

MFI Select

+2.2%

MFI Formula

+1.5%

MFI Combined

+1.8%

Miscellaneous

+2.8%

Dividend

+1.9%

Dividend Index

+0.5%

R3K

+2.3%

MFI Index

+3.2%

GARIX

+2.1%

Now the keen-eyed reader will look at that table and say, "whoa, great 1st week for MFI Index - up 3.2%!" And that would be right. Really helped by a first week pop in SRNE, at +34%. Recall the MFI Index is a basket of 50 stocks (I just show for tracking purposes) that I reconstitute once a year. My big winner for the week was my Misc portfolio, up 2.8%. It was definitely a risk-on kind of week.

I feel that since the MFI Index was so beaten down in 2017 and they had such a nice start here that I would give them an "attaboy" and show their first week results by stock.

Stock

Initial
Price

End
Price

Percent Change

SRNE

3.80

5.10

34.2%

MPAA

24.99

28.01

12.1%

PTN

0.86

0.96

11.6%

EGRX

53.42

59.14

10.7%

AMAG

13.25

14.55

9.8%

BPT

20.10

21.40

6.5%

CNCE

25.87

27.54

6.5%

CASA

17.76

18.80

5.9%

SQBG

1.78

1.88

5.6%

IDCC

76.15

79.85

4.9%

ABCD

5.68

5.95

4.8%

KLAC

105.07

109.86

4.6%

LEE

2.35

2.45

4.3%

GME

17.95

18.68

4.1%

GILD

71.64

74.52

4.0%

ABC

91.82

95.32

3.8%

PDLI

2.74

2.84

3.6%

HPQ

21.01

21.75

3.5%

BIVV

53.92

55.80

3.5%

OPHT

3.12

3.22

3.2%

TGNA

14.08

14.53

3.2%

MEET

2.82

2.91

3.2%

SYNT

22.99

23.67

3.0%

PBI

11.18

11.51

3.0%

SP

37.10

38.05

2.6%

MSGN

20.25

20.75

2.5%

EGOV

16.60

17.00

2.4%

CPLA

77.40

79.10

2.2%

HRB

26.22

26.79

2.2%

PCOA

575.00

586.00

1.9%

ESRX

74.64

76.01

1.8%

TRNC

17.59

17.89

1.7%

AGX

45.00

45.75

1.7%

CJREF

9.21

9.35

1.5%

DIN

50.73

51.46

1.4%

UTHR

147.95

149.79

1.2%

EVC

7.15

7.20

0.7%

DLX

76.84

77.24

0.5%

IPG

20.16

20.19

0.1%

INVA

14.19

14.19

0.0%

VEC

30.85

30.70

-0.5%

TVTY

36.55

36.35

-0.5%

OMC

72.83

72.17

-0.9%

HSII

24.55

24.25

-1.2%

NLS

13.35

13.15

-1.5%

DISCA

22.38

22.00

-1.7%

NHTC

15.19

14.85

-2.2%

AMCX

54.08

52.33

-3.2%

MCFT

22.22

21.42

-3.6%

VIAB

30.81

29.10

-5.6%

MFI Select

This is the first of my two real money MFI Portfolios. Both of my MFI portfolios will be dampened in their results starting the year as I essentially have a 30% cash position built in (so that impacts the table above). I will be adding that cash in over the course of 2018. I also have a more hypothetical tracking (the $100,000 start in tables below that ignores my adding cash).

MFI Select was started by me in August 2012 after I had quick MFI for a year due to frustration of sub par results. But instead of slinking away, I studied my MFI results and tracking work I have done since 2006. My main finding was that MFI screens have too many stocks that just don't meet the Jake's Bubble Gum Shop mold from the book. So I try and weed some of those out. I also (in MFI Select) allow myself total free rein on how I pick the stocks, be it official screen or my own internal screens. I do buy and hold for a year. And I have 4 tranches of 5 stocks each. Here is how a hypothetical $100,000 spread over first 4 tranches would have grown:

Date

Differential

MFI
Value

R3K Value

1/1/2013

-1.78%

102,798

104,575

4/1/2013

-0.43%

106,804

107,234

7/1/2013

4.29%

114,888

110,597

10/1/2013

19.67%

138,655

118,990

1/1/2014

26.63%

157,138

130,503

4/1/2014

30.38%

162,991

132,616

7/1/2014

39.23%

177,971

138,740

10/1/2014

29.38%

168,321

138,944

1/1/2015

28.17%

174,306

146,140

4/1/2015

29.95%

178,565

148,612

7/1/2015

62.69%

211,437

148,743

10/1/2015

43.12%

181,175

138,052

1/1/2016

63.33%

209,514

146,186

4/1/2016

47.34%

195,770

148,430

7/1/2016

50.41%

201,092

150,680

10/1/2016

42.98%

198,563

155,582

1/1/2017

45.60%

209,503

163,936

4/1/2017

55.70%

229,473

173,735

7/1/2017

60.28%

239,060

178,782

10/1/2017

75.60%

262,489

186,886

1/1/2018

92.19%

291,114

198,926

Current

94.63%

298,102

203,472

You might note that the growth from $291,114 to 298,102 in 2018 is 2.4%, which is larger than the 2.1% I showed at very start. The biggest reason for that is my hypothetical approach does not have the cash component.

Here are how the stocks did individually during the week:

Stock

Last
Week

Current

Dividend

Change

SIMO

52.96

54.89

-

3.6%

MSGN

20.25

20.75

-

2.5%

YY

113.06

128.10

-

13.3%

CELG

104.36

104.99

-

0.6%

EVC

7.15

7.20

-

0.7%

ICHR

24.60

27.50

-

11.8%

AKRX

32.23

32.46

-

0.7%

VIAB

30.81

29.10

-

-5.6%

RHI

55.54

56.31

-

1.4%

MD

53.44

54.50

-

2.0%

QCOM

64.02

66.47

-

3.8%

KLAC

105.07

109.86

-

4.6%

TIME

18.45

18.55

-

0.5%

GHC

558.35

566.15

-

1.4%

WNC

21.70

21.60

-

-0.5%

RGR

55.85

53.35

-

-4.5%

TGNA

23.69

24.92

-

5.2%

YY has been unbelievable. Just three+ weeks to go for it. Here are my 4 tranches:

2/1/2017

Start

Current

Dividend

Pct
Gain

R3K
Gain

AKRX

$19.10

$32.46

$0.00

69.9%

21.4%

YY

$41.08

$128.10

$0.00

211.8%

21.4%

KLAC

$85.11

$109.86

$2.26

31.7%

21.4%

WNC

$17.65

$21.60

$0.24

23.7%

21.4%

RGR

$52.75

$53.35

$1.36

3.7%

21.4%

Totals

68.2%

21.4%

5/6/2017

Start

Current

Dividend

Pct
Gain

R3K Gain

WSTC

$24.15

$23.50

$0.00

-2.7%

15.2%

TGNA

$25.75

$24.92

$0.21

-2.4%

15.2%

TIME

$15.05

$18.55

$0.08

23.8%

15.2%

MSGN

$23.55

$20.75

$0.00

-11.9%

15.2%

QCOM

$54.93

$66.47

$1.71

24.1%

15.2%

Totals

6.2%

15.2%

8/15/2017

Start

Current

Dividend

Pct
Gain

R3K Gain

GHC

$591.10

$566.15

$1.27

-4.0%

12.1%

ICHR

$19.80

$27.50

$0.00

38.9%

12.1%

MD

$43.00

$54.50

$0.00

26.7%

12.1%

SIMO

$43.05

$54.89

$0.30

28.2%

12.1%

RHI

$44.15

$56.31

$0.48

28.6%

12.1%

Totals

23.7%

12.1%

11/15/2017

Start

Current

Dividend

Pct
Gain

R3K Gain

MSGN

$16.67

$20.75

$0.00

24.5%

6.9%

CELG

$100.60

$104.99

$0.00

4.4%

6.9%

EVC

$5.78

$7.20

$0.05

25.4%

6.9%

SIMO

$46.88

$54.89

$0.00

17.1%

6.9%

VIAB

$24.41

$29.10

$0.20

20.1%

6.9%

Totals

18.3%

6.9%

Solid numbers. Only May is the laggard, but it is vastly improved from Labor day. Then here is table that summarizes all tranches:

Category/Tranche

August

November

February

May

Total

Initial Investment

25,000

25,000

25,000

25,000

100,000

Current Tranche

23.7%

18.3%

68.2%

6.2%

26.8%

Previous Tranche

-0.1%

42.6%

10.7%

19.1%

23.1%

Tranche -2

2.8%

8.0%

-14.3%

-25.2%

-7.2%

Tranche -3

11.2%

69.4%

8.5%

18.3%

26.8%

Tranche -4

41.4%

14.2%

78.3%

33.0%

41.7%

Tranche -5

14.1%

43.7%

0.0%

0.0%

14.5%

MFI Overall Gain

128.0%

407.0%

208.6%

48.8%

198.1%

Current Balance

56,996

126,756

77,160

37,191

298,102

R3K Current Tranche

12.1%

6.9%

21.4%

15.2%

13.9%

R3K Overall Gain

114.7%

119.1%

96.3%

83.7%

103.5%

R3K Balance

53,680

54,771

49,086

45,934

203,472

Annualized
IRR

16.5%

37.1%

25.7%

8.9%

22.0%

Wow, up to a 22.0% annualized IRR. Not quite the 31% from the book, but a very good number. You can see my 4 current tranches are up an average of 26.8% vs R3K 13.9%. That will drop back after February first when I move the 68.2% from current to "Previous tranche". You can also see, looking down the columns, that November has been my best month for tranches, up 407% in total. May is my worst (not doing well this time either) up just 48.8%.

My best tranche ever was February 2013 at 78.3%. May 2015 was the worst, down 25%.

MFI Formula

Same series of tables. I started MFI Formula with real money in October 2014. Again, 4 tranches with 5 stocks each. It is called Formula as I pick my stocks based on formula screening and random number generator.

Date

Differential

Value

R3K Value

10/1/2014

0.00%

100,000

100,000

1/1/2015

-0.33%

100,664

100,995

4/1/2015

5.09%

106,781

101,695

7/1/2015

4.82%

106,423

101,604

10/1/2015

6.39%

100,703

94,312

1/1/2016

-3.36%

96,830

100,012

4/1/2016

0.34%

102,371

101,548

7/1/2016

-0.19%

103,022

103,216

10/1/2016

-0.85%

106,377

107,230

1/1/2017

1.57%

113,406

111,832

4/1/2017

-1.86%

116,227

118,091

7/1/2017

-2.40%

119,144

121,545

10/1/2017

-2.56%

124,448

127,007

1/1/2018

-3.63%

131,460

135,086

Current

-4.41%

133,584

137,999

Not doing as well, trailing benchmark by a bit. It did edge ahead in early December, but has fallen back again (SYNT really hurt).

4/1/2017

Start

Current

Dividend

Pct
Gain

R3K
Gain

BKE

$18.45

$21.65

$0.75

21.4%

17.0%

CSCO

$33.76

$39.53

$1.16

20.5%

17.0%

GILD

$67.50

$74.52

$1.56

12.7%

17.0%

OMC

$85.53

$72.17

$1.65

-13.7%

17.0%

SYNT

$16.76

$23.67

$0.00

41.2%

17.0%

Totals

16.4%

17.0%

7/1/2017

Start

Current

Dividend

Pct
Gain

R3K Gain

CSCO

$30.98

$39.53

$0.58

29.5%

13.7%

GME

$20.95

$18.68

$0.76

-7.2%

13.7%

HPQ

$17.60

$21.75

$0.27

25.1%

13.7%

RGR

$60.70

$53.35

$0.44

-11.4%

13.7%

SYNT

$16.21

$23.67

$0.00

46.0%

13.7%

Totals

16.4%

13.7%

10/1/2017

Start

Current

Dividend

Pct
Gain

R3K Gain

DIN

$43.14

$51.46

$0.97

21.5%

8.8%

GILD

$82.85

$74.52

$0.52

-9.4%

8.8%

GME

$20.50

$18.68

$0.38

-7.0%

8.8%

HPQ

$20.22

$21.75

$0.13

8.2%

8.8%

OMC

$74.80

$72.17

$0.55

-2.8%

8.8%

Totals

2.1%

8.8%

1/2/2018

Start

Current

Dividend

Pct
Gain

R3K Gain

AMGN

$177.11

$180.65

$0.00

2.0%

1.8%

GME

$18.06

$18.68

$0.00

3.5%

1.8%

GILD

$71.64

$74.52

$0.00

4.0%

1.8%

HRB

$26.34

$26.79

$0.00

1.7%

1.8%

OMC

$72.81

$72.17

$0.00

-0.9%

1.8%

Totals

2.1%

1.8%

First look at the newest tranche. Off to a +2.1% start. Note the R3K 1.8% is not as good as R3K for the year. This is because I do not start tranche at start of day. I bought my stocks around noon and used the R3K value at that time.

Here is table showing all tranches:

Category/Tranche

October

January

April

July

Total

Initial Investment

249,820

249,939

250,180

249,728

999,667

Current Tranche

2.1%

2.1%

16.4%

16.4%

8.5%

Previous Tranche

7.0%

16.5%

25.2%

26.7%

19.2%

Tranche -2

5.5%

9.3%

-0.2%

-12.5%

0.5%

Tranche -3

0.5%

11.0%

0.0%

0.0%

2.9%

MFI Overall Gain

15.8%

44.2%

45.4%

29.1%

33.6%

Current Balance

289,261

360,503

363,706

322,368

1,335,838

R3K Current Tranche

8.8%

1.8%

17.0%

13.7%

10.3%

R3K Overall Gain

46.0%

37.3%

36.6%

32.3%

38.0%

R3K Balance

364,718

343,062

341,693

330,498

1,379,971

Annualized
IRR

4.6%

12.9%

14.4%

10.6%

10.6%

So 10.6% annualized IRR not as sexy as the 22% from my Select approach. but I believe in this approach and I did add 33% more funds to my January 1st tranche. My 4 current tranches are up 8.5% and trailing benchmark 10.3% by a bit.

Here are stocks during the week:

Stock

Last
Week

Current

Dividend

Change

GILD

71.64

74.52

-

4.0%

OMC

72.83

72.17

-

-0.9%

GME

17.95

18.68

-

4.1%

SYNT

22.99

23.67

-

3.0%

CSCO

38.30

39.53

0.29

4.0%

HPQ

21.01

21.75

-

3.5%

AMGN

177.11

180.65

-

2.0%

HRB

26.22

26.79

-

2.2%

BKE

23.75

21.65

-

-8.8%

DIN

50.73

51.46

-

1.4%

RGR

55.85

53.35

-

-4.5%

BKE was off pretty sharply as they announced December same store sales and they were pretty uninspiring.

Dividend Portfolio

As I have discussed, I am going to start tracking my dividend portfolio against a dividend index based on 40 securities Barron's listed in December. I think this is more fair that comparing against R3K as I have some bond holdings (and they are my largest), such as OIBAX. That being said, there is no doubt that I stretch for yield more than the Barron's list. Their average yield is around 4.2%. I am at 6.4%. Here is my portfolio:

Dividend
Stocks

Start

Current

Divvy

Overall Pct
Gain

Weekly Pct
Gain

12/30/17
Price

Yield

OIBAX

5.91

6.01

0.19

4.9%

0.8%

19.42

4.0%

KCLI

48.89

45.35

0.33

-6.6%

0.2%

14.24

2.4%

TK

6.20

10.05

0.08

63.6%

7.8%

21.44

2.2%

KNOP

21.30

21.80

-

2.3%

5.1%

49.75

9.5%

CPLP

3.54

3.51

0.08

1.5%

4.5%

13.78

9.1%

JQC

8.18

8.28

0.62

8.9%

0.7%

13.64

6.9%

TGP

17.89

20.50

-

14.6%

1.7%

40.59

2.7%

EVG

14.46

14.23

0.33

0.7%

-0.8%

27.82

6.5%

PSXP

47.39

53.20

1.03

14.4%

1.6%

8.49

4.9%

ISBC

13.25

13.74

0.15

4.9%

-1.0%

8.93

2.6%

FDEU

18.40

19.31

0.94

10.1%

2.5%

21.25

7.5%

LADR

13.01

13.55

0.62

8.9%

-0.6%

5.95

9.3%

NS

37.98

31.32

0.82

-15.4%

4.6%

8.80

14.0%

RLJ-PA

28.45

26.82

0.98

-2.3%

-0.7%

17.05

7.3%

NRZ

16.56

17.71

1.17

14.0%

-1.0%

21.94

11.3%

SBRA

22.28

18.49

0.91

-12.9%

-1.5%

12.80

9.7%

RILY

15.58

18.15

0.21

17.9%

0.3%

10.89

0.9%

OCSI

8.68

8.55

0.38

2.9%

1.8%

9.07

8.9%

DSL

19.47

20.69

1.84

15.7%

2.5%

3.50

8.7%

TGONF

11.04

13.80

1.79

41.2%

3.8%

16.73

5.1%

AMID

13.25

13.95

-

5.3%

4.5%

13.25

11.8%

TOO

2.25

2.60

-

15.6%

10.2%

16.85

1.5%

O

25.61

55.21

20.93

197.3%

-3.2%

65.01

4.6%

Totals

8.1%

2.0%

6.4%

I have been so disappointed with KCLI. This is a small (and pretty ill-liquid) life insurer that trades way under BV. I view it as extremely safe. But they dropped (I understand) as they had some tax loss carry-forwards that are now worth less under the new lowered corporate tax rates. Who knew?

You can see TOO had a great first full week for me, up 10.2%. I just wish I had bought more. TK was also up nicely at 7.8% (I do own a boatload (haha) of them). Of course they own part of TOO and TGP. So a little incest in here.

Here are the stocks/holding of the dividend index. I won't publish these every week.

Ticker

12/30/2017

Current

Dividend

YTD Change

Weekly Change

Yield

AMLP

10.79

11.32

-

4.9%

4.9%

7.58%

NML

9.38

9.85

-

5.0%

5.0%

6.70%

EPD

26.51

27.73

-

4.6%

4.6%

6.01%

ETP

17.92

18.74

-

4.6%

4.6%

12.57%

FDD

13.73

14.07

-

2.5%

2.5%

2.71%

VGK

59.15

60.86

-

2.9%

2.9%

2.63%

DDAIF

84.57

87.88

-

3.9%

3.9%

3.94%

NVS

83.96

86.27

-

2.8%

2.8%

3.15%

NOBL

64.04

64.79

-

1.2%

1.2%

1.72%

VYM

85.63

86.97

-

1.6%

1.6%

2.76%

MRK

56.27

56.99

-

1.3%

1.3%

3.32%

PEP

119.92

118.67

-

-1.0%

-1.0%

2.66%

VNQ

82.98

81.03

-

-2.3%

-2.3%

4.34%

RQI

12.65

12.43

-

-1.7%

-1.7%

7.72%

TCO

65.43

64.26

-

-1.8%

-1.8%

3.89%

SLG

100.93

99.86

-

-1.1%

-1.1%

3.13%

T

38.88

38.14

-

-1.9%

-1.9%

5.13%

VZ

52.93

52.48

-

-0.9%

-0.9%

4.44%

CHL

50.54

50.31

-

-0.5%

-0.5%

3.66%

DTEGY

17.66

18.04

-

2.1%

2.1%

3.78%

DSU

11.70

11.70

-

0.0%

0.0%

2.34%

HIO

5.07

5.06

-

-0.2%

-0.2%

6.94%

MUB

110.74

110.48

0.21

0.0%

-0.2%

2.22%

PRHYX

6.76

6.80

-

0.6%

0.6%

5.40%

NEA

13.75

13.84

-

0.7%

0.7%

5.26%

JNK

36.72

37.03

0.17

1.3%

0.8%

5.55%

VWITX

14.13

14.13

0.03

0.2%

0.0%

0.00%

PHMIX

9.09

9.09

0.03

0.4%

0.0%

2.80%

UTG

30.94

30.78

-

-0.5%

-0.5%

4.20%

XLU

52.65

51.33

-

-2.5%

-2.5%

3.41%

DUK

84.11

81.94

-

-2.6%

-2.6%

4.26%

EIX

63.24

62.98

-

-0.4%

-0.4%

3.53%

PFF

38.07

37.97

0.18

0.2%

-0.3%

5.61%

JPC

10.34

10.25

-

-0.9%

-0.9%

7.57%

WFC-PL

1,309.99

1,295.56

-

-1.1%

-1.1%

5.80%

TIP

114.08

113.92

0.21

0.0%

-0.1%

2.49%

SHY

83.85

83.78

0.08

0.0%

-0.1%

0.98%

TLT

126.86

125.71

0.26

-0.7%

-0.9%

2.46%

Totals

-

-

-

0.5%

0.5%

4.28%

The tracking of dividends on this portfolio is a real pain. So I have created a table that approximates the dividends. It may be off a bit from time to time, but should be pretty accurate in aggregate.

Finally, I have moved my small bank portfolio, which yields about 2% from Misc to Dividend. Basically I put holdings in Dividend portfolio if (1) they have a dividend and (2) I plan to hold long term.

Bank

Start

Current

Dividends

Change

Yield

ACBI

16.99

17.95

-

5.6%

0.0%

ASB

25.69

25.50

-

-0.7%

2.2%

FBIZ

23.69

22.64

-

-4.4%

2.3%

FULT

18.81

18.18

0.11

-2.8%

2.4%

FNB

14.47

13.98

-

-3.4%

3.4%

MSBI

32.96

32.90

-

-0.2%

2.5%

NRIM

37.47

33.65

0.21

-9.6%

2.7%

PACW

48.30

50.80

-

5.2%

4.0%

SONA

17.13

16.14

-

-5.8%

2.0%

WNEB

10.88

10.80

-

-0.7%

1.1%

Total

-1.7%

2.3%

Note that the -1.7% is overall for this basket of stocks... not since start if 2018.

Miscellaneous

It was a good week for my Misc holdings. SELB, EXXI and AUPH were all up in excess of 10%.

Here is my basket of small miners:

Miner

Start

Current

Change

TORXF

9.90

8.30

-16.2%

SAND

4.48

5.24

17.0%

NSU

2.38

2.48

4.2%

KLDX

2.41

2.47

2.5%

KL

14.49

16.52

14.0%

GSS

0.87

0.84

-2.7%

FSM

4.24

5.09

20.0%

EXK

2.14

2.47

15.4%

BTG

2.61

2.98

14.2%

EGO

1.18

1.41

19.5%

Total

8.8%

Like the banks, this is a cumulative number. I do have a fair number of biotechs in my Misc portfolio. I have decided that over time as I sell them (either because they hit their catalyst or did not), that I will change and create a basket approach for biotechs. I think that will be a less risky approach and still give me some of the excitement of biotechs.